"China has vast human resources they can put to designing a new architecture. "
That reminds me of the Seymour Cray quote:
"Last week Control data... announced the 6600 system. I understand that in the laboratory developing the system there were only 34 people including the janitor. Of these, 14 are engineers and 4 are programmers.. Contrasting this modest effort with our vast development activities, I fail to understand why we have lost our industry leadership position by letting someone else offer the world's most powerful computer." - Watson
"It seems like Mr. Watson has answered his own question." - Seymour Cray

Some important things to remember:
China is a centralized government society.
Given the chance, wouldn't all of us as engineers opt for a shiny new architecture rather than an old x86 or even MIPS RISC, ARM or ARC?
China has vast human resources they can put to designing a new architecture.
China may be looking for a showcase (Don't you remember the Olympics?)
Designing a new architecture would be an extremely difficult project to be successful (and "extremely" isn't a big enough word for it), but did I mention centralized government, control, and massive manpower?
I've got more to say, but apparently the "machine" won't let the comments be longer than the original story so look to http://www.strategysanity.com/o/charch.html for more than 2000 characters worth.

You are right jaybus. Nothing like a large government bureacracy to make your engineering decisions for you!
Just imagine a scenario: you come up with some small, low-power consumer design. You find the perfect processor, maybe some new ultra-low power one that a European company comes out with that will really set your product apart. The government steps in "Sorry comrade: either use the official Chinese processor, or go to jail".

Bad idea. Much better to allow competing designs to compete continuously. With a government mandate, they will compete exactly one time, after which they will be stuck with a single design. The winner will have little need for continued innovation, knowing that they have locked down a huge market. Once ingrained in the Chinese government, and all they subsidize, it will be practically impossible to extricate. The losers will fade away or, more likely, second source the winning design. And then there is the inevitable political dealings involved with winning the contest in the first place.

We all must look at China's this initiative with a lot of seriousness. Chinese leadership always plans for long term goals and not short term profits. If they intend to do something on their own they really mean it and they will be successful in it also, I bet.

This may be special requirement and protection for Chinese Defence projects. They need CPU for which they have all rights and they can get it in Rad Hard version. This is must requirement for Defence industry like China.